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Frequently asked questions and answers about sanctions

What do sanctions mean?
Sanctions – restrictive measures established by international public law in respect of certain countries, specific subjects of sanctions (e.g. terrorists; persons accused of military and political crimes; extremist organizations etc.) or in respect of a certain activity, and approved by international organizations and/or countries.
There are the following types of sanctions:
  • financial restrictions – restrictions in respect of assets, financial instruments and cash funds belonging to the subject of sanctions (a private individual/legal entity or another identified subject of sanctions) or controlled by them;
  • civil restrictions – restrictions in respect of all types of transactions with economic resources, if these transactions result in change of the owner, or the purpose of these transactions is to make available cash funds or other type of economic resources for the subject of sanctions;
  • tourism restrictions – restrictions for the subject of sanctions related to the entry, staying in or transit through the territories of the country, аnd restrictions on the provision of tourism services;
  • restrictions on the goods of strategic purpose and turnover of certain goods – a restriction/prohibition to sell, deliver, transfer, export or otherwise dispose of or make available to the subject of sanctions strategic goods or other goods specified in a specific regulatory act;
  • embargo on weapons and military goods – a restriction/prohibition to sell, deliver, transfer, export military goods to the subject of sanctions.
What regulatory enactments govern the client’s obligation to comply with sanctions?
Chapter 7 of the Charter of the UN Security Council is a legal basis for imposing sanctions of the UN Security Council.Article 29 of the Treaty on the European Union and Article 215 of the Treaty on the Functioning of the European Union is a legal basis for imposing the EU sanctions. The Republic of Latvia imposes sanctions adopted by the UN Security Council through regulatory enactments of the EU and the Law on International and National Sanctions of the Republic of Latvia which stipulates that sanctions imposed by the EU regulations are mandatory for execution and must be applied throughout the territory of the Republic of Latvia. Since the JSC Rietumu Banka is registered in the Republic of Latvia (EU member state), the regulatory enactments and sanctions adopted by the Republic of Latvia, the European Union and the UN Security Council are directly applicable and mandatory for execution.

Why the client who is not the resident of the Republic of Latvia/the USA is obliged to comply with the provisions of documents regulating the sanctions imposed by the European Union/the United Nations/the United States?
JSC Rietumu Banka renders financial services in the territory of the Republic of Latvia on the basis of the license for the activity of a credit institution issued by the Financial and Capital Market Commission (www.fktk.lv), therefore the customer servicing is carried out in accordance with laws of the Republic of Latvia which is stated in the Terms and Conditions of JSC Rietumu Banka and Client Agreement. In accordance with Clause 7 of JSC Rietumu Banka and Client Agreement: The substantive law of the Republic of Latvia governs the rights and obligations of the Bank and the Client arising from the Agreement.The US sanctions are applicable and mandatory for execution not only in respect of private individuals and legal entities belonging to the USA, but also apply to the transactions in US dollars. If a client makes payments in US dollars and/or acquires securities of the US issuers and/or securities denominated in US dollars, the obligation to comply with the US sanctions applies to both the client directly, since it is the client who is the party to the transaction, аnd to JSC Rietumu Banka, since JSC Rietumu Banka is the financial institution that participates in the transaction.

Why did the Bank draw up the document “Client Certification of Obligation to Observe National and International Sanctions”?
When servicing its customers, JSC Rietumu Banka complies with requirements of laws of the Republic of Latvia and the European Union, аnd is guided by the best international practices in the prevention of laundering of proceeds from crime and financing of terrorism. Recently, the issue of sanctions is particularly significant for financial institutions. The Bank performs transactions on behalf of persons specified in the client’s order via counterparties/correspondents, therefore the Bank needs to understand and conduct an analysis of the client and his/her transactions, as it is the Bank that sends financial resources. The client, by signing the certification and delivering it to the Bank, approves that he/she is informed of the sanctions regime and undertakes to comply therewith, the client’s transactions comply with the requirements of the regulatory enactments and are of legal nature. The practice of signing the certification of obligation to observe the sanctions is introduced in many countries and enables the financial institution to conduct an analysis of clients and their transactions according to the “Know Your Customer” requirements.

Who is an intended recipient of the document “Client Certification of Obligation to Observe National and International Sanctions” and must it be signed?
The document “Client Certification of Obligation to Observe National and International Sanctions” is intended for all clients of JSC Rietumu Banka and must be signed.

Policy “Know Your Partner”
The Bank encourages its clients to obtain information about their cooperation partners and the areas of their partners’ activities before starting business relationship and during the relationship (paying a special attention to transactions involving persons from the regions and jurisdictions of sanctions). Thus, the client will be able to make sure that the transactions with this partner will not conflict with the sanctions laws.

Which sanctions of particular attention are currently effective?
  • The EU and the US imposed sanctions in respect of specific individuals of Russia and the Ukraine, аnd other restrictions in respect of certain business areas and activities – in particular, oil production.
  • The EU has established restrictions on Russian military industry and export to Russia of dual-use goods and specific technologies, if these are intended for military use.
  • The EU and the US have imposed sanctions that prohibit short-term debt financing (maturity up to 30/90 days) and transactions with new shares, bonds and other financial instruments of defense and energy companies, if the issuer of these instruments or the recipient of debt financing is state-owned banks (Gazprombank (Газпромбанк), Vnesheconombank (Внешэкономбанк), Sberbank (Сбербанк), Russian Agricultural Bank (Российский Сельскохозяйственный банк) and Bank VTB (Банк ВТБ) (incl. Bank of Moscow (Банк Москвы)). These restrictions also apply to associated companies (subsidiaries) of the above-mentioned banks and companies (if the ownership exceeds 50%).
  • The EU and the US imposed sanctions on Crimea and Sevastopol. In particular, the sanctions apply to export and import of goods, transactions with real estate, tourism services, business investment and in the areas of energy, transport and communications, gas, oil and minerals in Crimea and Sevastopol.
  • The EU and the US imposed sanctions against the governance structures of unrecognized republics of Luhansk and Donetsk.
  • The UN Security Council, the EU and the US regularly publish and maintain lists of persons whose transactions are prohibited or completely banned.
  • A list of the countries subject to major or broad EU and US prohibitions: Crimea, Sevastopol, Cuba, Iran, North Korea, Sudan and Syria.
* Please find the full list of sanctions programs and countries in the links below.

Consequences for breaking sanctions
Punishments for non-compliance with international sanctions are stipulated in Section 84 of the Criminal Law of the Republic of Latvia. For violation of laws and regulations governing implementation of the sanctions established by the UN Security Council, the ЕU and other international organizations in the Republic of Latvia or which govern implementation of the national sanctions of the Republic of Latvia, the applicable punishment is a fine or deprivation of liberty for a period up to eight years.

Useful references to regulatory enactments
Law on International and National Sanctions of the Republic of Latvia
EU regulatory enactments in the area of sanctions (in English)
Website of the Ministry of Foreign Affairs of the Republic of Latvia

Сonsolidated sanctions list of the UN Security Council
List of US sanctions programs and description thereof by countries/regions
List of US OFAC SDN sanctions (complete ban on dollar transactions)
List of US OFAC SSI sanctions (sectoral sanctions)
Common military list of the European Union
List of dual-use items in the EU (COUNCIL REGULATION (EC) No 428/2009)

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